Early Signs of a Rental Market Bubble: “Grab That Apartment Before the Rent Spikes”

Dynamic pricing, long the norm for airline tickets — the same computer-generated practice responsible for hour-to-hour price shifts for hotel rooms and goods sold on Amazon.com — has come to bear on the nation’s housing markets. Day-to-day increases and decreases, worth hundreds of dollars, are not out of the ordinary in many rental markets. Society must decide: Are such trends genuinely reflective of market demands or are high-speed revenue management programs also driving market trends in much the same way high-frequencey trading has been criticized for spawning stock market volatility?

Key Questions:

1) Does the emergence of dynamic pricing in the real estate sector allude to a sophisticated means of price fixing and collusion?

2) Should we amend laws pertaining to “unfair advantage” to account for novel forms of technology — to compensate for the reality that ordinary consumers are no match for a multimillion-dollar computer algorithms?

3) We might be able to walk away from an over-priced hotel room or airline ticket — to vote with our pocketbooks. But we don’t have the luxury of skipping out on necessities like food and housing. Should dynamic pricing strategies be employed in all markets — even those for which bubbles and busts may have a particularly invasive, deleterious reach?

How has dynamic pricing impacted housing costs in your neck of the woods? Join the discussion in the comment section!

In strong-growth markets like Charlotte, landlords are adopting dynamic pricing strategies similar to the airlines and Amazon.com—meaning the asking rent price for apartments can change by hundreds of dollars in the blink of an eye.

The Charlotte Observer recently took note of how commonplace it’s become for rent rates at large apartment complexes in the city to be dictated by software algorithms that track supply and demand — and then tweak asking prices accordingly. The result is that if a handful of units are scooped up by renters over the course of a weekend, the monthly rental rate for similar units in the complex could soar on Monday, if not sooner.

Rent prices can and do change all the time, occasionally with quick, dramatic swings. During one particularly volatile ten-day period, the Observer tracked the monthly rate for a one-bedroom apartment at one complex as it rose from $982 to…